Canadian mining tax system distorts investment opportunities

Economists at the University of Calgary say Canada's provinces should get rid of mining tax breaks because they distort investment opportunities, Bloomberg reports.

In a report released last week, entitled Repairing Canada's Mining-Tax System to Be Less Distorting and Complex, the economists say the tax breaks encourage investment in projects that might otherwise be uneconomic.

They say special tax credits and the depreciation allowance for mining investments should be dropped. Provincial governments should adopt a rent-based cash-flow tax because they cannot afford the tax breaks. Additionally, more should be done to improve tax neutrality between mining and non-mining companies.

The federal government is already planning to cut tax breaks by $55 million and and lower deduction rates for mineral-property development.

Beacon News reports that in 2010, the federal government collected a total of $8.4 billion in corporate taxes, royalties and employee income taxes from the mining industry. In 2012, it collected $9 billion.